Demand shocks and economic fluctuations

Demand shocks and economic fluctuations

by Yi Wen

Part of Working paper -- 2006-011A

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"This paper studies conditions under which demand-side shocks can generate realistic business cycles in RBC models. Although highly persistent demand shocks are necessary for generating procyclical investment, variable capacity utilization and habit formation can reduce the required degree of persistence"--Federal Reserve Bank of St. Louis web site.

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